A new blue-chip index of the top 60 stocks traded on Nasdaq and U.S. listed exchanges is challenging the preeminence of the Dow Jones Industrial Average.
The USLX was created by the Financial Information Forum (FIF), a New York-based market-data service company, which is licensing the index to vendors, broker dealers and other parties.
Automatic Data Processing, Bridge Information Systems, Data Broadcasting Corporation and ILX Systems have signed licensing agreements to publish the USLX.
Two Strengths
The USLX is obviously far from being a popular benchmark, but it does have at least two strengths: unlike the Dow Jones, the USLX includes Nasdaq stocks and is available to users free of charge.
"We think a lot of vendors won't be able to afford the new charges for the Dow Jones," said Tom Jordan, executive director of the New York-based FIF. "We want to provide vendors with an alternative average."
Dow Jones & Company, publisher of the Dow Jones index, recently announced plans to increase its monthly access fee for index values, raising a furor among some users.
The USLX consists of the 60 stocks with the highest market capitalization traded on the New York Stock Exchange, Nasdaq and the American Stock Exchange. The new index represents almost 40 percent of the total market capitalization of these markets.
The Dow Jones, on the other hand, is a price-weighted average of 30 actively-traded NYSE stocks. The oldest and most widely-followed market index, the Dow Jones represents almost 20 percent of the market value of NYSE stocks.
Better Indicator
Currently, the USLX includes 54 NYSE stocks and six Nasdaq listings. "We couldn't countenance leaving stocks out of a blue-chip index like Intel or Cisco [System Inc.] just because they are traded on Nasdaq," Jordan said. "Including Nasdaq companies will create a better indicator of the marketplace."
Richard Tofel, a Dow Jones spokesman, said the company is negotiating with customers to raise monthly charges for publishing the Dow Jones index. The market-data giant is seeking a $1 per month per terminal fee for real-time feeds. Charges for delayed feeds are significantly less, about 25 cents per month per terminal. Tofel added that the Dow Jones is published on 300,000 data terminals in the U.S.
Tofel acknowledged that the proposed charges have created resentment. "Our raise in charges has spurred a fair amount of public discussion," Tofel said. "But I expect all our major customers to agree to new charges."
For its part, the FIF said it launched the new index partly for strategic marketing reasons. To ensure that the index continues to list the 60 U.S. stocks with the highest market capitalization, the FIF will evaluate component securities once a year for possible relistings.
